Business analysis report for Australia grocery market Business Essay

RETAIL BUSINESS IN THE DIGITAL WORLD
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TOC \o "1-6" \h \z \u Woolworths and Amazon Background and Competition PAGEREF _Toc41114428 \h 3
Issues Facing Woolworths PAGEREF _Toc41114429 \h 4
Solution I: Time-Based Digital Business Strategy PAGEREF _Toc41114430 \h 5
Solution I: Implementation and Control PAGEREF _Toc41114431 \h 6
Issue 2: Commodity Pricing PAGEREF _Toc41114432 \h 9
References PAGEREF _Toc41114433 \h 10
Woolworths and Amazon Background and Competition
The proliferation of digital business in the grocery retail industry in Australia has caused a paradigm shift in the once stable supermarket chain trade. The entry and growth of giant online companies such as Amazon in Australia has sent fears of possible implosion or loss of major market share among dominant supply chains like Woolworths. Online business has been in existence in the last two decades but some of the technological modifications it has undergone have resulted into creative nuances that have made it a relatively nascent industry. With such knowledge, supermarkets and grocery stores in Australia must act promptly in order to offer comparative or above par competition.
Amazon’s growth over the years has been attributed to its customer-centric business strategy of ensuring quick commodity delivery, competitive pricing and technological leverage CITATION Bus13 \l 1033 (Publishing, 2013)Some of the major problems that Woolworths may experience due to the entry of Amazon into the Australian market are huge pricing disparities and agile technological advancements. Amazon which boasts a multi-dimensional digital business, massive recognition and popularity in the market, large economies of scale and significantly diverse revenue sources as compared to most of its competitors; enjoys a greater bargaining and purchasing power from manufacturers enabling it to sell products at lower prices CITATION Tod16 \l 1033 (Bishop, 2016). Such incentives to customers are likely to disrupt the traditional retailers in the market.
Australia’s demography is largely millennial and studies have indicated that this group of people prefers using a variety of digital payment plans offered by Amazon making them a potential key driver of digital retail trade (Yip, R. et al, 2019). Nevertheless, millennials are in control now more than ever before as they have an array of shopping options to choose from. For retail grocery businesses to remain afloat amidst the entrance of the online trade behemoth, key strategic adjustments are inevitable.
Amazon’s success has been largely fuelled by its large catalog which was estimated at about 250 million products in about 20 categories rendering it the world’s largest souk. In response to Amazon’s entry into Australia in 2017, Woolworths shifted its focus into offering convenient services and increasing its commodity range to its clients by more than 30 percent CITATION Mic18 \l 1033 (Michell, 2018). The range was however tailored to meet grocery stores demographics and as competition intensifies, retail stores such as Woolworths have no option but to diversify their operations and increase their service and product offerings as a point of difference.
Issues Facing Woolworths
Given that Amazon is largely an online market place, Woolworth’s needs to adjust to the changing times in order to remain in business in the future. Woolworths needs to focus on two areas where it currently faces challenges. These areas are technological innovation and product pricing. It should lean towards the development and implementation of an innovative digital business strategy and the gradual realization of competing prices to match or surpass those of Amazon. In order to reap long-lasting results while implementing the digital business strategy, it is tantamount that Woolworths understands the scope, scale and speed of the digital business strategy as well as the basis of business value creation.
Solution I: Time-Based Digital Business Strategy
Digital business strategy rises above traditional business operation areas such as procurement, marketing, logistics, inventory management and customer service. On the other hand it heavily relies on the exchange of rich information through internal and external online interaction platforms CITATION Nia17 \l 1033 (McKeown & Durkin, 2017). It must also permit cross-functional processes and strategies to be tightly connected with the aid of inter-company information technology potential. An innovative time- based digital strategy will fine-tune Woolworths’ scope of taking advantage of software, hardware, internet connectivity and ensure prompt product delivery CITATION Ali16 \l 1033 (Weber-Snyman & Badenhorst-Weiss, 2016). Woolworths may outsource these services through partnerships with well established information technology firms in order to reduce its project costs or it may build its own digital resources so as to create new digital capabilities.
The best digital business strategy addresses four themes cited as scope, scale and speed of the strategy as well as its source of value creation and addition as well as capture CITATION Nia17 \l 1033 (McKeown & Durkin, 2017). In addressing the scope of the digital business strategy, one must examine the extent of relationship or combination between Woolworths’ information technology strategy and its business strategy, how effectively the digital strategy will transcend the brick-and-mortar retail store function and how well the strategy will optimize online retail sales as well as the information around them.
When addressing the scale of digital business strategy, Woolworths must consider the effectiveness of the strategy in scaling volume through strategic supplier alliances and partnerships, how efficient the strategy would be in optimizing the substantial information, knowledge abundance and data, how well it would leverage multifaceted online platforms and networks and how cost effectively and rapidly the information technology infrastructure can scale up and down to facilitate Woolworths’ implemented strategy achieves dynamic digital ability.
Also, the speed of the digital business strategy would be an important consideration as it would answer the questions of how efficient would the strategy be in facilitating the acceleration of new product launches. It would also answer the effectiveness of the strategy in ensuring speedy response to customers, how efficient it would be in improving learning to ameliorate long-term and short-term operational decision making, how it would strengthen the speed of supply chain coordination and how the strategy would make possible the creation of new business networks to provide matching capabilities.
Lastly an innovative digital business strategy should address the sources of the value chain. Here, the usefulness of a strategy in influencing value from information, its effectiveness in assigning value due control of Woolworths’ digital framework, its effectiveness in capturing value through corresponding models within the networks and its efficiency in taking advantage of the value from multi-sectional business models.
Solution I: Implementation and Control
The implementation of a digital business strategy requires adequate planning and follows certain procedures. The implementation process commen...